Russia tests Nato defences

0:01Good morning from the Financial Times. Today is Thursday, September 11th, and this is your FT News Briefing. A popular Trump ally was killed yesterday, and NATO is scrambling after Russian drones breached Polish airspace. It's a really, really big warning that we need to keep investing so that if Putin comes for real, we can make sure that we're better prepared next time. Plus, investors are liking the sound and vision of Bowie bonds. I'm Sonia Hudson, and here's the news you need to start your day.

0:44U.S. conservative activist Charlie Kirk was shot and killed yesterday. Kirk was speaking at an outside event at a university in Utah when he was hit in the neck. President Donald Trump announced his death on Truth Social and called him, quote, quote, great and even legendary. His killing comes at a time of increasing political violence in the country. Trump survived two assassination attempts during his run for president last year. The attack on Kirk was condemned by both Republicans and Democrats. House Speaker Mike Johnson said, quote, it violates the core principles of our country.

1:29NATO forces shot down Russian drones over Poland for the first time yesterday. It's the most serious clash between the two since Moscow's full-scale invasion of Ukraine. And experts say it showed how unprepared the military alliance is against surprise attacks. Here to talk about what's next in the conflict is Henry Foy. He's the FT's Brussels bureau chief. Hi, Henry. Hey, Sonia. So what happened on Wednesday, and why do experts think that NATO's response was lacking? So around 5 a.m. on Wednesday morning, the first of around 19 Russian drones entered Polish airspace. Some came from the direction of Ukraine.

2:15Some came from the direction of Belarus. and they were intercepted as part of a NATO mission, mainly Polish fighter jets. The reason, Sonia, why people are saying that this wasn't just a sort of routine shoot down by NATO is that these drones shouldn't be getting in to Poland. Poland is a NATO member state. The war in Ukraine has been going on now for more than three and a half years. And so the fact that these drones were even able to get into Poland has startled many experts. What do experts say NATO did wrong here in its military response? Like, how were these drones able to get through? It's not simply a case of what they did wrong.

2:59It's more that it exposed the holes in NATO's eastern air defense that we've known have been there for a long time. Lack of investment, lack of number of systems. And not just the sort of, do we have enough missiles to shoot down incoming projectiles, but do we have a different array of missiles? Because the way that this works, Russia has been bombarding Ukraine with drones and missiles at the same time. You've got to work out which ones are cheap and easy to shoot down, which ones are high-end, very dangerous missiles, which need the most expensive, most capable Western air defense tools to shoot them down.

3:34And essentially, these drones came in and we shot them down with very high-end NATO fighter jets. And what experts are saying is, look, if this was a real attack from Russia where they would send, you know, potentially 20 times more drones than the 19 we saw on Wednesday morning, plus missiles, NATO could well have been overwhelmed. So, Henry, was this basically kind of like a test from Russia that NATO failed? I mean, what is Russian President Vladimir Putin's plan here? Again, difficult to say that NATO failed, but analysts are saying this was definitely a test. And really, what the experts are saying is Putin was looking to see how NATO would respond.

4:17Which assets would they scramble? Would they use fighter jets? And so Russia would have been watching this very, very carefully to game plan in advance, if there was a real attack, what they would have to do to best outwit NATO's defenses. Okay, so Russia got a little bit more information about NATO's military capabilities and strategy. What has NATO said about its ability to protect its eastern border? So NATO have come out quite strongly and say, look, this was a very successful reaction by NATO. That was Secretary General Mark Rutter. The systems worked as they should. There were no casualties.

4:54There was no strike on any NATO military targets. However, Rutte did say it's a really, really big warning that we need to keep investing. We need to keep making sure that the eastern flank is well defended so that if Putin comes for real, we can learn from this test run and make sure that we're better prepared next time. Henry, what's next for NATO? Some voices, Radek Sikorsky, the Polish foreign minister, but there are many others are saying if NATO responds well to this attack, Putin won't do it again. If NATO is able through actions or through words, then this can be a good thing for NATO, what happened in Poland.

5:31If, however, NATO appears weak in Putin's eyes, if there's no real response, if they're saying this was just an accident, it shouldn't be taken seriously, then these people are saying Russia will just come again and next time with more serious weapons or potentially at multiple points along the eastern flanks. So really, Sonia, to answer your question, it's about how does NATO respond to this? And there are consultations going on right now amongst the allies as to, look, what's the message we need to send to Putin about where our red lines are? Henry Foy is the FT's Brussels Bureau chief. Thanks, Henry.

6:03Thanks so much.

6:10Britain's plan to boost growth by promoting life sciences has been dealt a blow. U.S. drugmaker Merck canceled plans to build a research center in London. The£1 billion center was already under construction and set to open in 2027. Merck said, quote, simply put, the UK is not internationally competitive. The decision comes after a long battle between drug makers and UK Health Secretary Wes Streeting over the price of drugs. Streeting walked away from talks with the sector last month. That was after the industry's lobby group rejected an NHS drug pricing scheme from the government. Merck said it would move the research activity to existing sites, mainly in the U.S.

7:05Big investors are buying debt backed by songs. Funds like BlackRock and Carlyle have raised more than$4 billion this year from so-called Bowie bonds, named after the singer David Bowie. Anna Nicolau is the FT's U.S. media editor, and she's here with me now to help make sense of the phenomenon. Hi, Anna. Hi, how are you? Doing well, thanks. So let's start with the basics here. What are Bowie bonds? You know, who's doing the borrowing? Who's doing the lending? Sure. Bowie bonds are effectively bonds that are backed by future royalties from songs. It originated with David Bowie, which is why they're still kind of called that.

7:50And in the case of David Bowie, he was borrowing money up front that got paid back from future song revenues. And the name stuck around because his deal was really groundbreaking at the time. Now we're seeing it more often, and it's taking place amongst these big Wall Street companies that had previously bought song copyrights themselves, and they are now selling debt against the songs that they own. Ana, how much growth are we seeing here, and why is this happening now? So just this year so far, and it's still September, at least$4.4 billion of debt has been raised, backed by song copyrights.

8:33And last year, there was$3.3 billion of debt. And that's up from basically virtually none just a few years ago. I think there's a couple of reasons for that. Music itself has become a really popular investment in the past five or six years. We've seen Wall Street really pile into songs, and they view song copyrights as this low-risk, pretty predictable income stream. So they've become a lot more comfortable with music itself as an investment. Is any of this affecting the music industry itself? I mean, are they reaping any of the benefits? That's a good question. I mean, they're not getting all of the extra money.

9:15That's the thing is some of these artists, for instance, Justin Bieber sold his catalog. So if you sell your publishing, you've basically given away the copyrights. So he just got the lump sum when he sold his catalog and he's not getting any extra income from it. Right. And every artist makes different choices based on, you know, what they want to do. But there is an open question and people, when I'm talking to, you know, music executives, they do start to wonder. because a lot of these big Wall Street firms in just the past few months have said, we're going to come in and spend billions of dollars on songs the next few years.

9:50And people are starting to wonder, are there even enough catalogs to buy? People have already bought like Springsteen and Bob Dylan and a lot of the iconic ones. I think for the music industry, it's obviously a positive thing when there's this much interest, but it's also, there's never been this much attention on it from Wall Street. Yeah, what do you think the ultimate impact on the music industry could be if this type of investing continues to grow? Yeah, there's definitely made a professionalization. The major labels have gone public, as in the traded and public stock market now. So there's a lot more pressure on them to keep growing very quickly.

10:32It's interesting kind of when culture and finance collide in that way. Because music has always been a kind of more informal, weird, quirky industry. So I don't know. That's a great question. Come back to me in a couple of years. Anna Niclau is the FT's U.S. media editor. Thanks, Anna. Thank you.

10:59Before we go, if you have questions about U.S. politics and the economy, I want to hear them. Send a message to the email in the show notes, and I might answer them on this week's Swamp Notes podcast. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news. Thank you.

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